Tsipras announces capital controls, banks closed after run on ATMs

Customers gather outside a closed National bank branch in Greece. Greek banks will stay shut on Monday and capital controls will be imposed, Mr Tsipras announced. AFP PHOTO  

In Summary

• Uncertainty over how events will unfold in coming days prompted long queues of up to a hundred people to form outside some ATMs in Greece. Seeking to stave off panic, Tsipras assured Greeks their deposits were "totally safe".
• French Prime Minister Manuel Valls warned of a "real risk" of Greece leaving the eurozone if it Greeks vote against the EU's bailout proposals in the planned referendum.
• Missing the IMF payment on Tuesday does "not spell immediate formal default or even Grexit. But it would put Greece on the slippery slope towards Grexit," wrote Holger Schmieding, chief economist of Berenberg Bank.

By AFP
More by this Author

Greek banks will stay shut on Monday and capital controls will be imposed, Prime Minister Alexis Tsipras announced, pleading for calm as anxious citizens emptied cash machines in a dramatic escalation of the country's debt crisis.

Speaking on national television on Sunday evening, Tsipras said the Bank of Greece had recommended a "bank holiday and restriction of bank withdrawals" after the European Central Bank said it would not increase its financial support to Greek lenders, despite early signs of a chaotic bank run.

The drastic measures announced by Tsipras topped off a weekend of high drama that began with the leftist premier's unexpected call for a July 5 referendum on creditors' latest reform proposals after bailout talks in Brussels collapsed.

In response, angry EU and IMF creditors rejected a request to extend the nation's bailout beyond its June 30 expiry date, sparking fears Greece could default on a key debt payment to the IMF due the same day and possibly crash out of the eurozone.

Uncertainty over how events will unfold in coming days prompted long queues of up to a hundred people to form outside some ATMs in Greece.
Seeking to stave off panic, Tsipras assured Greeks their deposits were "totally safe".

"Any difficulties that may arise must be dealt with calmness. The more calm we are, the sooner we will get over this situation," he said, adding that Athens had again requested a "prolongation of the (bailout) programme".

The prime minister did not go into details or say how long the government's measures would remain in place, but Greek media reported that banks would likely stay closed for a week — until after the referendum — and ATM withdrawals could be limited to 60 euros ($65).

While the Athens stock exchange will also be closed on Monday, global stock markets are expected to be highly volatile as traders return to the desks to find Greece hurtling towards financial collapse.

Immediately after Tsipras's address to the nation, Greeks appeared to take the upheaval in their stride.

In Athens, teacher Yiannis Grivas told AFP he had withdrawn his entire 940-euro salary on Friday so "I have enough to live on for a few weeks."
He added: "I am not afraid of capital controls, I never take out more than 50 euros a day anyway."

In the capital's upscale Kolonaki area, 32-year-old Anna tried in vain to find a working cash machine.
"There is no more money," she said, adding that she hoped her countrymen would vote in the referendum "to stay in the eurozone and the European Union" and that "the nightmare will finally end".

Since Friday night alone, 1.3 billion euros ($1.45 billion) have been withdrawn from the Greek banking system, according to the head of the bank workers' union Stavros Koukos.

A banking source in Greece said only 40 percent of cash machines now had money in them and a host of European governments including London and Paris advised citizens travelling to Greece to carry cash with them.

In a tweet, an EU spokesman said Commission head Jean-Claude Juncker would hold a press conference at 1045 GMT on Monday to discuss the latest developments in Greece.

REAL RISK

The Frankfurt-based ECB's governing council earlier Sunday held a crisis telephone conference and pledged to maintain emergency liquidity assistance — keeping open its life-support for Greek banks and, by extension, the Greek state.
But it pledged no extra cash for banks.

The move further raised the stakes in Greece's festering debt crisis after five months of tough bailout talks culminated on Friday night with Tsipras's shock call for a referendum on creditors' latest cash-for-reforms offer.

French Prime Minister Manuel Valls warned of a "real risk" of Greece leaving the eurozone if it Greeks vote against the EU's bailout proposals in the planned referendum.

But Tsipras, whose Syriza party came to power in January on an anti-austerity platform, has advised voters against backing a deal he said spelled further "humiliation" for a country that has endured five years of recession, turmoil and skyrocketing unemployment.

SLIPPERY SLOPE

Unless creditors heed Tsipras's renewed request for a bailout extension, Greece's rescue plan will formally expire on Tuesday. This will almost certainly mean Greece will default on more than 1.5 billion euros ($1.7 billion) due to the IMF that same day.

Missing the IMF payment on Tuesday does "not spell immediate formal default or even Grexit. But it would put Greece on the slippery slope towards Grexit," wrote Holger Schmieding, chief economist of Berenberg Bank.

US President Barack Obama and German Chancellor Angela Merkel weighed in on the unfolding crisis on Sunday.

In a telephone call, Obama and Merkel "agreed that it was critically important to make every effort to return to a path that will allow Greece to resume reforms and growth within the eurozone," the White House said.

The International Monetary Fund, accused by Athens of pushing a hardline on reforms, said it was monitoring events and stood ready to provide assistance.

The focus now will be on quarantining Greece and containing the fallout for the other 18 members from "contagion" on financial markets which are set for a turbulent day on Monday when they reopen.

AFP